It’s been four years since we released our white paper, As Easy as ACB.  The paper provided investors with step-by-step instructions on how to track the book value of their ETFs, using the free online resource, Adjusted Cost  We were the first to admit that the title of our paper was misleading – tracking your ACB is about as easy as reciting the alphabet backwards.

Adjusted Cost has further simplified the ACB tracking process by offering an upgrade to their basic features for $49 per year. The main benefit for premium subscribers is the ability to import all phantom distributions and return of capital for their ETFs, saving precious time and possibly avoiding an overpayment of taxes.

Source: Adjusted Cost

The service allows you to import up to ten years of data (you can download any missing information from the Canadian Depository for Securities (CDS) website, using their tax breakdown service).  If there were any unit splits (such as for the iShares Core S&P/TSX Capped Composite Index ETF’s 4-for-1 unit split on August 8, 2008), these will also need to be inputted manually.

At a premium

After upgrading to premium subscriber status, the process for importing ETF tax information was very straight-forward. To illustrate the steps, I’ve included an example below for the iShares Core MSCI EAFE IMI Index ETF (XEF).  The example assumes that 2,000 units of XEF were purchased for $53,300 on January 15, 2016.

Step 1: Click on Auto Import Tax Information for ETFs / Funds / Trusts

Source: Adjusted Cost

Step 2: Search for the ETF Tax Report

After choosing the 2016 tax year from the drop-down menu, enter XEF as the ETF symbol and then click on Search.  Once the search results appear, click on the fund name.

Source: Adjusted Cost

Step 3: Apply the Transactions

Once you’ve reviewed the return of capital and non-cash (phantom) distribution information, click on Apply Transactions.  If you held the ETF during other tax years, repeat Steps 1 through 3, changing the tax year each time in Step 2.

Source: Adjusted Cost

2016 results

The return of capital transactions have now been automatically included (decreasing the ACB by $2.26 and $1.06 respectively). The reinvested capital gains (phantom) distribution has also been included, increasing the ACB by $219.88.  If the investor had forgotten to adjust their cost base for this non-cash distribution, they would eventually pay an extra $58.85 in tax (assuming an Ontario resident in the highest marginal tax bracket [$219.88 × 50% × 53.53%]).  The additional cost of the premium service would have easily paid for itself in this scenario.

Source: Adjusted Cost

Is it worth the extra cost?

As always, there will be a small percentage of investors that will cringe at the thought of paying $49 annually for information that is available for free online. Based on the feedback I receive from DIY investors, most of them will find this service to be totally worth the fee.